Children's Hospital Oakland and UC San Francisco Benioff Children's Hospital moved a step closer to an affiliation this week and said they hope for a final agreement by next summer.
The two hospitals signed a letter of intent to seek "possible joint operations," leaders of both organizations said in a notice to employees.
Details about how an affiliation would work and what it would mean for patients remain sketchy.
But it could help improve the financial performance of both institutions, making equipment purchases and upgrades easier, the letter said.
The two organizations may also combine their substantial research activities.
The letter to employees was signed by Dr. Bertram Lubin, president and CEO of Children's Hospital Oakland; Mark Laret, CEO of Benioff; and Sam Hawgood, dean of the UC San Francisco School of Medicine.
As a stand-alone institution, Children's Hospital Oakland has struggled financially in recent years, in part because it has lacked the resources available to hospitals that are part of large health systems.
Talks with UCSF have been under way for months. Leaders called the signing of a letter of intent "an important milestone" in their discussions.
Children's Hospital Oakland had previously discussed partnering with Stanford and Sutter Health but did not reach an agreement.
Lubin could not be reached for comment Wednesday, but in September, he said when asked what a partnership might look like, "We don't want to lose our identity of who we are as a hospital."
Any agreement would need to be approved by the Children's Hospital Oakland board of directors and University of California regents.
Sandy Kleffman covers health. Contact her at 510-293-2478. Follow her at Twitter.com/skleffman.